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How Auto Industry became high on Nigeria, S/Africa’s Agenda at Tokyo Summit

-By Ironhand Sydney Chukwuemeka

The priority accorded the automotive sector by both Nigeria’s President Muhammadu Buhari, and President Cyril Ramaphosa of South Africa in their diplomatic agenda at penultimate week’s Tokyo International Conference on African Development (TICAD VII Summit), was a clear indication of how important the sector is to the economy of both countries.

On the sidelines of the summit hosted under the theme of Advancing Africa’s Development through Technology, Innovation and People, President Buhari wooed the Toyota conglomerate to establish a manufacturing plant in Nigeria and held investment discussions with top officials of Japan Bank for International Cooperation.

On his part, the President of South Africa, Cyril Ramaphosa, took time off the TICAD VII Summit proper, to visit Nissan’s global headquarters and the company’s Oppama plant in Kanagawa, where he test-drove a semi autonomous drive-assist model of Nissan Leaf.

The two countries’ interest in the auto sector as they participated in the summit did not come to many who are familiar with their auto industries as a surprise, for apart from being the largest economies in Africa, Nigeria and South Africa also have in place automotive policies that are supposed to, and are actually driving the industry {depending on the country under reference}.

For instance, South Africa’s automotive industry has flourished under the Automotive Production and Development Programme {APDP} as a global exporter of fully built-up vehicles. The government had bolstered the sector via the Motor Industry Development Programme (MIDP) between 1995 and 2012 before the programme was replaced with the current APDP in 2013, and is expected to be in effect till 2020.

Mr. David Obi

As a result of the consistency of the successive programmes, many of the major multinational firms now source components and assemble vehicles for the local and international markets in the country. In some cases, the countries South African plants export vehicles to include Nigeria, potentially the biggest market on the continent, but presently dominated by used vehicles.

Currently, there are no fewer than seven auto plants in South Africa, including BMW South Africa (Pty) Ltd, Ford Motor Company of Southern Africa (Pty) Ltd, Isuzu South Africa (Pty) Ltd, and Mercedes-Benz SA Ltd.

Nissan South Africa (Pty) Ltd, Toyota South Africa Motors (Pty) Ltd, and Volkswagen Group South Africa (Pty) Ltd also produce vehicles in the country, while a few brands collaborate with the existing plants to assemble vehicles on contract basis.

The sector is one of South Africa’s most important, contributing about 6 percent to the country’s GDP and accounting for about 12 percent of manufacturing exports. Last year, the country’s vehicle production increased by 1.6 percent to 610 854 units, from the 601 338 units recorded in 2017.

In April this year, in order to further deepen the relationship between Nissan and South Africa, the former had hinted of plans to invest $200 million in the country to locally produce the new Nissan Navara.

Penultimate week’s visit to Nissan headquarters by Ramaphosa during the TICAD VII Summit was, therefore, more like the two parties taking advantage of an auspicious opportunity to consummate the investment.

During the visit, Nissan President and CEO Hiroto Saikawa met with Ramaphosa at Nissan’s headquarters, remarking “Our $200 million investment in South Africa, which we announced earlier this year, shows our commitment and confidence in the country’s important role as a gateway to the African continent. We hope to continue supporting South Africa’s economic development.”

Interestingly, Nissan also assembles vehicles in Nigeria through Stallion Nissan Motors Nigeria Ltd [Stallion NMN], which was the first plant to roll out cars following the coming into effect of the Nigeria Automotive Industry Development Plan {NAIDP} in 2014.

However, auto industry analysts in Nigeria have been wondering if the $200 million investment in Nissan South Africa {instead of Nigeria’s Stallion NMN} and Hiroto Saikawa pledge to “continue supporting South Africa’s economic development”, are an indication that the Japanese manufacturer is simply investing in a more conducive environment.

Like South Africa’s APDP, Nigeria’s NAIDP was conceived in 2013 {though the effective date was July 2014}. But, unlike in South Africa, as many as 40 assembly projects exist in Nigeria because many investors responded to the policy initiative by setting up mainly SKD {semi knocked-down} facilities.

Ironically, their total annual output is less than 20, 000, as most of them are either dormant or assembling at abysmally low level of their installed capacities, and this is not what the NAIDP was intended to achieve. .

If Toyota Motor Corporation of Japan decides to respond to President Buhari’s invitation to set up a plant in Nigeria, the question industry watchers would be waiting for an answer to is: Will the Japanese auto maker be partnering with Toyota Nigeria Limited which claimed it has an auto plant in an undisclosed location in Lagos where a couple of Hiace mini buses were said to have assembled a few years ago, or will it opt to invest in an entirely new plant?

However, the President’s Special Adviser on Media and Publicity, Femi Adesina, who was in Tokyo, said that it was too early to speculate, because things were still “at ideas stage.”

Recently, in an interview, the Chairman of the Coscharis Group, Dr. Cosmas Maduka, regretted setting up an assembly plant in Lagos at about N1.7billion, citing the slow implementation of the auto policy and lack of a legal support for the initiative, as reasons.

Similarly, the Chairman, Motor Vehicles & Miscellaneous Assembly Sectoral Group of the Manufacturers Association of Nigeria {MAN}, Dr. David V. C. Obi, identified the reluctance of the President to assent to the Nigeria Automotive Industry Development Plan {NAIDP} Fiscal Incentive and Guarantees Bill as a disincentive.

Obi, however, commended President Buhari for making the auto industry top priority during the summit in Japan, but appealed to him to sign the bill, take extra steps to remove impediments in auto assembly in the country, and boost investor confidence in the sector.

An International Organization of Motor Vehicle Manufacturers survey showed recently that Japanese manufacturers with operations in South Africa produce more than 50 percent of all new vehicles used on the African continent.

Unfortunately, auto plants in Nigeria do not contribute much to the local market, or exporting to other African countries. When the TICAD VII Summit is viewed against this backdrop, it becomes clear why Nigeria needed to intensely woo reachable global auto industry leaders, and why South Africa is consolidating its advantage.